If you are retired or nearing retirement, make sure you don’t fall into making the mistakes listed below.

1) Collecting Social Security Benefits early

If you collect benefits before your normal retirement age of 66 and you continue to work, you probably will lose some benefits. If you earn more than $15,120 in 2013, you will forfeit $1 in benefits for every $2 you earn over the limit. This earnings cap goes away when you turn 66.

2) Not coordinating Social Security Benefits with your spouse

As a married couple, your main goal should be to maximize Social Security benefits for the surviving spouse. Statistics will show us that is usually the wife. That means the main breadwinner, usually the husband, should delay collecting Social Security retirement benefits until age 70 when they will be at their maximum and will pass to the surviving spouse.

3) Leaving Social Security Benefits on the table

Even if you decide to delay collecting retirement benefits until age 70, you should file for spousal benefits at age 66. That will boost your household income by 50% of the full retirement benefit the other spouse is already collecting. Meanwhile, your delayed retirement benefit is growing by 8% per year until you start collecting at age 70.

4) Receiving a check

If you transfer retirement accounts to an IRA, make sure you don’t get a check and the money is directly transferred to the new custodian. If you elect to get a check, your employer is required to withhold 20% for taxes and within 60 days you are required to roll the entire amount including the 20% you didn’t receive into an IRA. Unfortunately, any money not deposited will be treated as a taxable distribution and subject to tax and possibly early-withdrawal penalties.

5) Accessing Retirement accounts too early

If you withdraw your retirement funds before the age of 59 1/2 you will have to pay a 10% early-withdrawal penalty as well as the entire amount will be subject to Federal & State income taxes. An exception to this is if you leave your job, you can take distributions from your 401(k) without paying a penalty. If you transfer your 401(k) to an IRA you will lose this option.

6) Stopping early IRA distributions

There is a way to take distributions before age 59 1/2 from your IRA and avoid the penalty. It is called a 72(t) exception and you must take substantially equal periodic payments from your IRA based on your life expectancy for at least 5 years or 59 1/2 whichever is longer. Make sure you don’t deviate from the schedule or you will owe a 10% penalty retroactive back to the first withdrawal, plus interest.

7) Not planning for medical expenses

If you retire before age 65 and eligible for Medicare, finding health insurance might be difficult and very expensive. You can extend your employer benefits under COBRA for up to 18 months, but you will have to pay 100% of the premum and that can be very expensive. You might be better off financially finding an individual policy with a high deductible.

8) Failing to enroll for Medicare Part B on time

Once you turn age 65 you have 3 months to enroll in Medicare Part B which covers doctors visits and outpatient services or incur a late-enrollment penalty that will increase your premium by 10% for every year you delay. This penalty is waived if you or your spouse is covered by an employer plan.

9) Ignoring Required Minimum Distributions

Once you hit the age of 70 1/2 , you are required by April of the following to start taking withdrawals by December 31 of that year and they must continue every year thereafter. If you miss the deadline the penalties are very extreme-50% of the amount you were required to take. You can skip this distribution from your 401(k) if you are still working, but this does NOT apply to your IRA.

“Wealth, properly employed, is a blessing; and a man may lawfully endeavor to increase it by honest means.” ~ Muhammad

Talking with anyone about money is always hard, but talking with your family and especially your kids can be quite difficult. Talking to your kids about finances can really help with their financial security as they get older and can put what they learned to practice.

1) Financial Education is Priceless

Teach them to be a life-long learner, have them take the time to learn about investing-how to manage and especially keep their money.

2) Spend less than you make

You can have anything you want, you just have to figure out how to increase your cash-flow to pay for it and invest ALL excess.

3) Debt- Good vs Bad

All debt is not created equal and never confuse the two. Good debt will provide leverage and will help you make more money through asset growth and increases wealth. Bad debt is usually consumer debt which takes your money in the form of interest and depreciation.

4) Start Investing early

The sooner you start the more time you will have to grow your wealth. Starting early will also let you gain valuable experience, learn, and recover from any bad errors or bad judgement. Time is also the one thing we can’t “buy” any more of.

5) Be prepared for emergencies

Be prepared for both financial and physical emergencies. Have a plan and needed resources available as well as a cash emergency fund-usually 6 months of living expenses.

6) It is your Money

Know one will care or respect your money as much as you. As President Reagan said-“Trust, but Verify”. Do the research and make informed decisions regarding your money and investments.

7) Think Long Term

Delay instant gratification and take your time on all financial decisions. The opportunity will be there tomorrow if it was meant to be. Remember, it is only you that has to live with the consequences.

8) Value Money

Treat money with respect and gratitude. Don’t lose money or treat it causally. Once you have it, take great care to keep it.

9) Live Simply

Surround yourself with positive people and not stuff. You must realize that the more stuff you acquire, the more time you will have to spend dealing with it.

10) Don’t be Material

Do not acquire stuff to impress people. Your real friends and your family are the ones that matter and will judge your character.

11) Never compromise your Values

Never let the pursuit of money change the real you. Live with integrity and value your character.

“What is the hardest task in the world? To think.”~ Ralph Waldo Emerson

We all go to the doctor for our annual physical as well as our bi-annual visits to the dentist, we need to get into the habit of doing these 7 things at the start of EVERY new year for our Financial physical.

1) Budget

Examine your 2012 budget and spending goals and make the necessary adjustments for this year. Has your income changed? What about expenses and how do you intend to fund any major purchases?

2) Year-end bonus

If you received a bonus, are you going to eliminate some debt, or is there a major expenditure that it could go for?

3) Taxes

Go over your 2012 tax projections and make any adjustments to your withholdings or estimated tax payments based on the review of your projected 2013 income. Has it gone up or sadly decreased?

4) Estate Planning

Are you going to make gifts this year, and how is the best way to structure them to take advantage of the $5 million exemption on estate and gift taxes.

5) Investment Accounts

Review performance of ALL investment accounts and make sure that the year-end percentages of stocks and bonds still are in line with asset allocation models that were determined at the start of last year.

6) Qualified Plans

Now is the time to revisit how much you are contributing to your 401(k) and are you still comfortable with the amount. For 2013 the maximum is $17,500 with a catch-up provision for all of us over the age of 50 of $5,500, for a total of $23,000.

7) Year-End meeting with Financial Professionals

Sit down with your advisors-Financial, Attorney, CPA, and Insurance agent to update them on changes that may have taken place since last year. Always keep your advisors updated in order for them to best serve you.

“When I was young I used to think that money was the most important thing in life. Now that I’m old, I know it is.” ~Oscar Wilde

Now is the time to stock up on some things as well as review other financial items in our life to compare costs.

1) Mortgages and Other Debt

Interest rates are at or near historic lows. It is probably wise to refinance your mortgage or get a mortgage as well as refinance home-equity lines of credit and small business loans.

2) Real Estate

Real estate values are back to their 2003 prices according to the most recent Case-Shiller Price Index and a Zillow.com survey of economists and real estate experts are predicting that for the most part the real estate market will hit bottom this year.

3) Cars

There is expected to be a glut of 3-5 year old used cars on the market this year as demand for leases on new cars increase. This glut should push prices down by this spring according to Black Book an auto pricing guide. The price gap between new and used is expected to widen with the price of new cars increasing because of latest in energy-efficiency and safety improvements and the price of used cars decreasing.

4) Life Insurance

Term life insurance rates have been falling for years and are near all-time lows. But don’t expect this to continue as insurer’s are not making as much money on the bonds they own due to this extended low-interest rate environment. Now is a good time to review your coverage and if needed acquire additional coverage, but after your review, you may find policies that are no longer needed and the coverage should be cancelled.

5) Postage

Now is a good time to stock up on stamps as the price is set to increase one cent the end of this month. Consider buying enough of the “Forever” stamp for 45 cents to last you the entire year.

So in conclusion, if you are in the market for any of the above items, now is the time to start your spend-to -save program.

“Few rich men own their own property. Their property owns them.” ~ Robert G. Ingersol

Getting wealthy is not about making the money, it’s about keeping the money. Having good money habits is what separates the very wealthy from the bankrupt. We all live in a very much consumer based society and it’s easy to rank one’s wealth based on what THINGS they have or how much of something they have. In fact, those wealthy that are leveraged to the hilt are no more wealthy than those living paycheck to paycheck. Here are some ways to increase your wealth in 2013.

Decrease Your Expenses

While analyzing you budget, what are you spending on things like your mortgage, car, utilities, school loans, and other fixed expenses? Chances are that during the course of the upcoming year, you will pay off one of those items. Instead of getting a bigger house or a new car, direct that extra money into your investment portfolio and at the end of 2013 your wealth will have increased.

Have a Garage Sale

If you are like most of us, you have entirely too much junk/things in your life. What I am talking about are items in our life that we just had to have and once they were purchased, that feeling went away. Now those must have items are just taking up space and are probably frustrating the daylight out of us. So in 2013, instead of thinking about the things we want to acquire, make it a point to think about what we want to get rid of this year and de clutter our physical as well as our mental space. So by having that garage/estate sale we will also bring in additional monies that can be put to work in your investment portfolio.

Start using your Debit Card vs Credit Card

Don’t use your credit card and then pay it off when you get the money, delay the spending until you get the money and then use your debit card instead. By spending your savings instead of using credit, you will think twice about the importance of the purchase and actual need vs want of the item.

Put your investing on auto-pilot

The best way to save money this year is to not let it get into your checking account to begin with. With the new year being here, increase the amount of your retirement plan deductions from your paycheck and set up auto-transfers to your savings account. This will decrease the amount of your paycheck, but it will also cause you to adjust the amount you spend because if it is not in the account it will be out of sight, out of mind.

Borrow, don’t buy

After all, what are friends and neighbors for? Instead of buying that hedge trimmer you use once a year or snow shoes you think would be nice to have, borrow from your friends or neighbor. I am sure you have things they would like to borrow as well. This goes along with us getting rid of all the items that clutter our house and garage any way.

These simple little steps combined can make a substantial impact on your investment portfolio over the next year and will cause you to look back on 2013 as the year of wealth creation.

“Money is like a sixth sense without which you cannot make a complete use of the other five.” ~ W. Somerset Maugham

The New Year is fast approaching, which means we are thinking about resolutions and changes we need to make in our life. So stop thinking about them and start implementing!

1) Evaluate Your Career

Now is the time to reflect and look back on your work. Has it changed by choice, or is the change caused by some unexpected event? Are you making more or less money than you were in January 2012? Whatever the situation may be, now is the time to create a plan for yourself to maximize your current employment.

2) Get your Partner Involved in the Discussion

One of the biggest mistakes couples can make is not talking about finances. Sit down and get ready for the New Year by brainstorming your money goals. Agreeing on common goals will make it easier to save. Do you want to pay off debt, cut spending, or save for a house? Creating common goals can and will reduce your stress level greatly. Get your partner involved and be on the same page.

3) Create a Budget and Track Your Spending

The end of the year is the best time to sit down and evaluate where your money is going, you can look back the entire year and see where you spent your money and how much. Look back and see how much was spent on that summer vacation, how damaging were your Holiday gifts? Take advantage of web-based budget programs that will interface with your financial institutions and get the year started on the right foot.

4) Put Your Investments and Savings on Auto-Pilot

Sit down with your payroll department and have your savings and investment programs deducted directly out of your check. It is amazing how if the money is not in your checking account it is so much harder to spend and therefore your portfolio will grow.

5) Change Your passwords

With identity theft on the rise, don’t let the financial crooks rain on your parade. Make it hard on the crooks to figure out passwords, don’t use common names or your favorite pet name. Utilize upper and lower case letters as well as mix in numbers. It is also a good habit to change them up at least on a quarterly time frame.

6) Evaluate Insurance coverage and Beneficiaries

Have your insurance needs changed this last year? Did you have any major life changers, such as buying a home, a marriage, or children? Is the amount of coverage still adequate? Are your beneficiaries still current? With the holidays here to inspire you, take out your policies and conduct a simple review and make this an annual habit.

With 2012 practically in the books, sitting down now and planning will make 2013 a year when goals are achieved, remember, take small steps instead of big ones. As the saying goes-How do you eat an elephant? One bite at a time.

Time is running out on 2012, so ignore the fact that Washington is having Fiscal Cliff negotiation issues and take advantage of current year-end tax strategies as well as some expiring tax laws.

1) Fully Fund Employer Based Retirement Plans

Max out your 401(k) plan by increasing your deductions from the final year-end paycheck or allocate a year-end bonus to your retirement plan. For 2012 you can contribute up to $17,000 and for all of those over the age of 50 you can add an additional $5,500 for a maximum of $22,500. December 31 is also the last day for the self-employed to set up a solo 401(k).

2) Review Your Investment Portfolio And Harvest Gains

This strategy goes against ALL traditional year-end tax advice. Most advice in the past has been to defer taxable gains into the next year. 2012 is the last year for individuals with taxable income up to $35,350 and married couples with taxable up to $70,700 to take a 0% tax rate for investment profits that were owned more than one year. You may also want to review long-term gains and realize them this year at a 15% rate, which is likely to increase to 23.8% next year and taxes on dividends could increase to 43.4% and be taxed as ordinary income.

3) Take Required Minimum Distributions (RMD)

If you are 70 1/2 or older, you must take a distribution from your IRA and a company retirement plan by year end. The amount of distribution is based on your life-expectancy table listed in IRS Publication 590 and your 2011 year-end account balance. The penalty for not taking your RMD is an onerous one-50% of the amount needed to be withdrawn.

4) Convert to a ROTH IRA

If you are thinking about converting your traditional IRA to a Roth IRA, 2012 is the year to do it. Tax rates are expected to be lower this year than in 2013, so therefore you will pay less tax. You have until December 31 to do the conversion. Keep in mind though, you have until October 15, 2013 to rescind the conversion.

5) Check your tax withholdings

Estimate what your 2012 tax liability is going to be and double check the amount of tax you have withheld so far this year. If you think you may owe money, then increase the tax you are having withheld from your last few paychecks to minimize what you are going to owe and avoid an underpayment penalty.

6) Check the deadline for your Flex-spending accounts

Make sure you know what your plans deadline is so you don’t lose any unspent funds. Some employers use a December 31 deadline while others have adopted a two-and-a-half month grace period after the year end, moving the spend-it-or-lose it deadline to March 15, 2013.

7) Charitable Contributions

This is a very tough one to call as there is uncertainty as to the preferred strategy. We know what the 2012 law is for charitable deductions and we think that tax rates will be higher in 2013, with that said, do we take deductions now or defer them into 2013 when rates will be higher? Something to consider is will they limit the cap on the deduction? Only time will tell.

Like anything when it comes to planning, please consult with your tax advisor to determine if any of these strategies should be considered before year-end.

“No One would remember the Good Samaritan if he had only good intentions. He had money as well.”~ Margaret Thatcher

Knowing how your financial advisor is paid is one of the very basic things you should ask them when determining whether they are a good fit for you or not. There are three major compensation models and depending on what you want to accomplish financially, you should work with the one that is most appropriate.

1) Commission-Only

The commission-only broker is only compensated when you buy something from them. That could be a stock, bond, mutual fund, alternative investments, or insurance products. These brokers usually provide specialized research for their recommendations and have access to analysts, traders and other industry experts.

Commission-only brokers are held to the suitability standard when recommending investment products, meaning that the investment must be suitable for the client based on the information provided by the client and income and net worth parameters.

2) Fee-Only

Fee-only advisors do NOT receive commissions at all for recommending specific investments. This should eliminate any conflict of interest as the fee-only advisor has no vested interest in the investment recommendation. Fee-only advisors are also considered fiduciaries and must put the client’s best interest ahead of any other interest.

Within this group there are different ways advisors get paid. The most common is an ongoing charge based on a percentage of assets under management ( AUM ), a 1% annual fee is common and that number can be higher as well as lower based on the amount of assets being managed. Under this model the advisor should provide customized financial-planning guidance and specific recommendations as to an asset allocation model designed specifically for the client. There are other fee-only compensation models such as a flat-fee charge for specific work being done, as well as some advisors charge an hourly rate similar to your attorney or CPA.

3) Fee-Based

Fee-based advisors are a combination of fee-only advisors and commission-only advisors. They may charge a fee to provide financial planning services, they may also recommend investments that will pay them a commission, and they might even have an AUM charge as well. Some fee-based advisors either charge a commission or a fee, but not both depending on the scope of the work requested. But there are those advisors that get paid both ways and working with them might actually be more expensive than going the fee-only or commission-only route. Another good reason to ask exactly how your advisor gets paid.

Fee-based advisors can operate under the suitability standard as well as the fiduciary standard or a combination of the two for different parts of their business. Once again, this should be another question that needs to be asked.

Conclusion

Finding the right advisor for you is the most important thing. Taking the compensation structure into consideration is important and depending on your financial needs, the knowledge of how they get paid and whether they operate under a suitability standard or a fiduciary standard should be known as well.

Social Security benefits can represent a large amount of money. A typical monthly benefit of $2,200 has a present value well over $500,000. But can I count on it? With the 2,728 rules that are in the programs handbook and too many interpretations to imagine, very few participants can understand it.

Below are some of the most common Social Security myths:

1) Social Security is going broke, so I need to start collecting ASAP

The latest issued report projects that Social Security will run out of funding in 2033. But this doesn’t mean that Social Security will be gone, it means that the systems revenues will not be capable of paying 100 percent of the benefits promised. The Administration estimates that benefits could be reduced by 22 percent unless Congress intervenes.

Because of this, many Americans are taking their benefits early at age 62. But waiting has its benefits. Every year you wait to collect after you have reached full retirement age, which is usually age 66 for baby boomers, you will get an additional 8 percent increase in benefits. Doing the math, by waiting until age 70 will mean you will receive an additional 30 percent more income.

2) The more I make now means more money at retirement

Social Security’s benefits formula favors low-income workers as opposed to high-income workers. Low-income workers will get back a higher percentage of what they put in compared to higher-income workers. Many retirees will contribute far more than they take out.

Over the years this has changed dramatically. According to the Associated Press, those who retired in 1960 could expect to receive seven times more in benefits than they paid in. Last year, the data showed a retired married couple who paid $598,000 in Social Security taxes throughout their careers could expect to receive $556,000 in benefits, and that is if the husband lives to 82 and the wife to 85!

3) I will be able to retire comfortably on Social Security alone

Should you find yourself relying solely on Social Security for your retirement income, you might find yourself in a difficult financial situation. The average Social Security benefit for a retired worker is approximately $1,234 per month. That happens to be less than the Federal minimum wage.

So if you are unable to supplement Social Security with your pension or investment portfolio, you had better be prepared to tighten the budget.

4) Social Security is only for the retired

Social Security also provides benefits to dependent survivors of workers who pass away as well as benefits for disabled workers of any age. Please note that those benefits can be very difficult to qualify for. There are more than 8 million workers receiving Social Security Disability benefits due to long-term physical or mental disability, so you would think it would be easy to qualify for. That is not the case, applications are up over 50% in the last 10 years and some applications are having to wait 2 years or longer.

5) Once I’m able to collect Social Security, I will be eligible for Medicare

Medicare benefits can’t be earned until age 65, but you can start to collect Social Security as early as age 62. There is an exception to this rule and that is if you collect Social Security Disability, you will get Medicare coverage automatically after 2 years.

6) As a divorcee, I can’t collect benefits from my ex-spouse

If you were married 10 years or longer, you are eligible to collect benefits on your ex-spouse’s work record. But if you remarry those benefits go away, unless that marriage also ends in divorce.

Like all of our governments laws, Social Security is not a simple piece of legislation. Since the Social Security Act became law in 1935, there have been hundreds of amendments that have added to its complexity. To make the best decision for you, it is very important to start planning and understanding what will work for you long before the time comes.

“I’ve never been poor, only broke. Being poor is a frame of mind. Being broke is a temporary situation.”~ Mike Todd

When you pick those winning numbers and your ship has finally landed, please avoid the following 7 mistakes most lottery winners make.

1) They Think They’re Getting The Whole Check

Our favorite “Uncle Sam” will be there to claim 50% of the total winnings. A major miscalculation would be to plan on spending the entire amount. CPAs are vital in helping make sure that the IRS doesn’t get any more than what they are entitled to.

2) Fail To Retain Professional Advice

Winners should surround themselves with a team of advisors- Lawyer, CPA and a Financial Advisor. Do yourself a favor and get the team assembled before you collect your winnings. Your attorney will be able to create privacy and prepare an estate plan to minimize estate taxes. Lottery winners can be easy prey for the unscrupulous and with a plan prepared by their team of advisors they will be able to be set for life financially. Coming into a large amount of money can be liberating, but it can also cause a life of excess and foolish spending.

3) Give Up Their Current Lives

It seems that the most successful winners are the ones that maintain their current lifestyle. They keep their support system in place, they don’t change their friends and some even keep their job. The less change in lifestyle seems to create a more balanced life.

4) Don’t Have A Clue How Long The Money Will Last

A large amount of money will be gone before you know it if you don’t have a plan. A financial advisor will be able to show, in great detail how long the money will last, especially considering the NET proceeds.

5) All Of A Sudden, You Are Mr or Mrs Popular

After you win, you will have more friends and relatives than you never knew. The hardest thing to do will be to JUST SAY NO!

6) Crazy-Stupid Investments

With the size of recent winnings, it is not prudent to take excessive risk and make crazy investments. A reputable financial advisor will be able to structure a conservative portfolio that will be able to stand the volatility of markets and still generate a steady income stream.

7) Abandon Common Sense

There are a lot of very smart people that want to help, but at the end of the day, if it sounds TOO good to be true, it probably is. Lottery winners need to always keep in mind whose money it actually is.

Coming into a large amount of money can be very liberating. But it can and will cause problems that most never consider. But with proper planning and common sense, it can be life changing for the better.

“A large income is the best recipe for happiness I ever heard of.” ~Jane Austen